December 17, 2016
Bank of Canada slashes outlook as oil, trade and housing concerns weigh
The Bank of Canada is keeping its key interest rate unchanged in the face of a new grimmer forecast that shows Canada’s economy is slowing down fast.
As it did in December, the central bank left its rate at 1.75 per cent Wednesday as the country takes a hit from lower oil prices, weaker housing activity, the U.S.-China trade clash and the decelerating global economy.
The Bank of Canada insists it remains committed to getting interest rates back up to neutral – the level where they are neither driving the economy forward nor slowing it down – but only “over time.”
“The appropriate pace of rate increases will depend on how the outlook evolves, with a particular focus on developments in oil markets, the Canadian housing market, and global trade policy,” the bank said in a statement.
The bank estimates its neutral rate is about 3 per cent, or 1.25 percentage-points below where the rate is now.
“The Bank of Canada has taken itself out of the rate hike game, and its message . . . suggests that it isn’t quite as sure about when it will come off the sidelines and hike again,” CIBC chief economist Avery Shenfeld said in a research note. “The rate message wasn’t that they were done for good, but rather, that the timing will be a bit more extended.”
October 29, 2017